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The Next Tesla?

November 10, 2021

On Wednesday, electric truck-maker Rivian will have the biggest IPO since Facebook in 2012. The question everyone is asking: Is it the next Tesla?

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Today, shares of Rivian Automotive begin trading on the Nasdaq stock exchange. On its first day as a public company, analysts expect Rivian to be worth $70B, more than BMW, Ferrari, Honda, and Hyundai. Its initial stock sale may be the 6th largest in US history, and the biggest since Facebook's in 2012.

Rivian is an electric vehicle (EV) company, like Tesla. Unlike Tesla, which has focused on sedans and other passenger vehicles, Rivian is offering fully electric pickup trucks and commercial delivery vans. RJ Scaringe founded the company in 2009, the same year he graduated from MIT with a PhD in mechanical engineering. 

Rivian is currently building 3 models: A pickup truck (the R1T), which customers began receiving in September; a midsize SUV (the R1S), which will begin shipping in December; and an electric delivery truck built specifically for Amazon, which has ordered 100,000 of the vehicle and expects to begin receiving them in December. 

Rivian’s early success has put one question on everyone’s minds: Could it be the next Tesla? Even after losing 12% of its value yesterday, Tesla is the world’s 6th most valuable company with a market cap over $1T. On a good day, it’s worth more than every traditional car company combined. It went public in 2010 with a market value of $1.7B. 

Tesla developed the first all-electric luxury sedan. Beyond that, though, it made groundbreaking innovations in batteries, supply chains, and vehicle production, all of which combined with sleek vehicles to create the trillion-dollar company people know today. After years of losses, Tesla became profitable in September 2019. Since then, its production capabilities have expanded and its quarterly profits have jumped from $143M in 2019 to $1.6B in the last quarter.  

Rivian is not profitable and has lost $2B+ since the start of 2020. Unlike Tesla, it isn’t pioneering the electric car or battery. It will be competing against other EV companies that already have global factory networks and supply chains. While Tesla has factories in North America, China, and Europe, Rivian is producing all its vehicles at a single facility in Illinois.

Yet unlike Tesla, which has focused on consumer vehicles, Rivian is targeting the truck market, which it says is huge, untapped for EVs, has less efficient vehicles, and pollutes more. That all translates to a huge opportunity for Rivian. Rivian also enjoys deep backing from some of the biggest tech and automotive companies, including Amazon, which owns 22% of it, and Ford, which owns 14%. 

Rivian also will benefit from having witnessed Tesla’s experience. Like Tesla, it will sell its vehicles straight to consumers rather than through dealerships. Tesla accuses Rivian of poaching its talent and stealing its battery technology. 

Skeptics say the window of opportunity is closing quickly. Tesla may launch its cybertruck as early as next year, and traditional truck manufacturers, including Ford and GM, are developing their own EVs.

There’s no telling if Rivian is the next Tesla, but there are plenty of investors who won’t wait to find out. 

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